Lee Menifee, Head of Americas Investment Research at PGIM Real Estate, shares that the 2024 Real Estate Outlook predicts a continued trend of lower property values in the coming year. Despite hopes for improvement due to steady long-term interest rates in 2023, bond markets had other plans for real estate. This has resulted in ongoing challenges such as debt scarcity and a bid-ask standoff between buyers and owners.
However, there are some positive aspects to note. Property revenues remain resilient despite economic headwinds and rent growth is expected to decelerate but still remain positive over the next four years. Additionally, with more than $1 trillion in commercial real estate loans coming due by 2025, there may be opportunities for recapitalization or “rescue capital” investments.
Overall, PGIM anticipates a quiet start into early 2024 as investors assess their options but expects an increase in attractive investment opportunities later on as debt pressures mount and sellers become more motivated.
